Note 13 - Company Earn-out and Warrant Liabilities

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Earn-Out and Warrant Liabilities [Text Block]

13. Company Earn-Out and Warrant Liabilities

Company Earn-Out

Certain holders of common stock and certain holders of options shall be issued additional shares of AvePoint’s common stock, as follows:

■ 1,000,000 shares of AvePoint’s common stock, in the aggregate, if at any time from July 1, 2021 through July 1, 2028 (a) AvePoint’s stock price is greater than or equal to $12.50 over any 20 Trading Days within any 30 trading day period or (b) the Company consummates a subsequent transaction, which results in the stockholders of the Company having the right to exchange their shares for cash, securities or other property having a value equaling or exceeding $12.50 per share;

■ 1,000,000 shares of AvePoint’s common stock, in the aggregate, if at any time from July 1, 2021 through July 1, 2028 (a) AvePoint’s stock price is greater than or equal to $15.00 over any 20 Trading Days within any 30 trading day period or (b) the Company consummates a subsequent transaction, which results in the stockholders of the Company having the right to exchange their shares for cash, securities or other property having a value equaling or exceeding $15.00 per share;

■ 1,000,000 shares of AvePoint’s common stock, in the aggregate, if at any time from July 1, 2021 through July 1, 2028 (a) AvePoint’s stock price is greater than or equal to $17.50 over any 20 Trading Days within any 30 trading day period or (b) the Company consummates a subsequent transaction, which results in the stockholders of the Company having the right to exchange their shares for cash, securities or other property having a value equaling or exceeding $17.50 per share.

The rights described above are hereafter referred to as the “Company Earn-Out Shares”. To the extent that any portion of the Company Earn-Out Shares that would otherwise be issued to a holder of options that remain unvested at the date of the milestones described above, then in lieu of issuing the applicable Company Earn-Out Shares, the Company shall instead issue an award of restricted stock units of the Company for a number of shares of AvePoint’s common stock equal to such portion of the Company Earn-Out Shares issuable with respect to the unvested options (the “Company Earn-Out RSUs”). In evaluation of the Company Earn-Out Shares and Company Earn-Out RSUs, management determined that the Company Earn-Out Shares represent derivatives to be marked to market at each reporting period, while the Company Earn-Out RSUs represent equity. Refer to “Note 16 — Stock-Based Compensation” for more information regarding the Company Earn-Out RSUs.

In order to capture the market conditions associated with the Company Earn-Out Shares, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the Sponsor Earn-Out Shares’ contractual life based on the appropriate probability distributions. The fair value was determined by taking the average of the fair values under each Monte Carlo simulation trial. The Monte Carlo model requires highly subjective assumptions including the expected volatility of the price of our common stock, and the expected term of the earn-out shares. Significant increases or decreases to these inputs in isolation could result in a significantly higher or lower liability. Under this approach, the fair value of the Company Earn-Out Shares on July 1, 2021, was determined to be $29.6 million. The fair value was remeasured as of  December 31, 2023, and was determined to be $18.3 million, and included in the earn-out shares’ liabilities in the consolidated balance sheets. As a result, an $11.1 million increase and a $4.3 million decrease in liability were recognized during the years ended December 31, 2023 and 2022, respectively, and included as other (expense) income, net in the consolidated statements of operations.

In December 2024, the required provisions were met, leading to the issuance of 2,964,658 Company Earn-Out Shares and a payment of $0.6 million to certain holders of common stock and options. The Company Earn-Out Shares liability was measured at fair value using the Company’s stock quoted price on the date each milestone was achieved. The cumulative fair value of the shares issued and cash used for settlement amounted to $54.5 million, which was included in the earn-out shares’ liabilities in the consolidated balance sheets. This resulted in a $35.8 million increase in liability recognized during the year ended December 31, 2024, recorded as other (expense) income, net in the consolidated statements of operations. Upon settlement, the Company Earn-out Shares settled in shares was reclassified from earn-out shares liabilities to equity, increasing the common stock amount and additional paid-in capital in the consolidated balance sheets by $0.0 million and $53.9 million, respectively. As of December 31, 2024, there were no remaining earn-out shares liabilities.

We estimated the earn-out shares fair value using a Monte Carlo model with the following significant unobservable assumptions:

	December 31,			December 31,
	2023			2022
Term (in years)		4.50			5.50
Volatility		55.00	%		55.00	%

Private Warrants to Acquire Common Stock

On July 1, 2021, the Company granted 405,000 private placement warrants with a 5-year term and exercise price of $11.50. Management has determined that the private placements warrants are to be classified as liabilities to be marked to market at each reporting period.

The private placement warrants are non-transferable and any transfer to an unrelated party would cause the warrants to be converted into public warrants. Consequently, the fair value of the private placement warrants is equivalent to the quoted price of the publicly traded warrants. Under this approach, the fair value of the private placement warrants on July 1, 2021, was determined to be $1.4 million. The fair value was remeasured as of  December 31, 2024 and 2023, and was determined to be $1.9 million and $0.5 million, respectively, and included in the other liabilities in the consolidated balance sheets. As a result, $1.5 million loss, $0.3 million loss, and $0.2 million gain was recognized during the years ended December 31, 2024, 2023 and 2022, respectively, and included as other (expense) income, net in the consolidated statements of operations.

As of December 31, 2024, 328,750 private placement warrants remained outstanding.